Institute for Private Enterprise » Bill Shorten

Robin Hood & Costs of Inaction

Des Moore — Wed, 08 May 2019 11:26:36 +0000

As Election Time Approaches Shorten Proposes Increasingly Unrealistic Policies

Part of my upbringing involved learning nursery rhymes one of which covered the life of Robin Hood. In those days Robin Hood was portrayed, at least to me, as an outlaw who lived in the forest and whose income came either from the proceeds of his attacks on the local town or from those passing through the forest. But he was portrayed as a hero because he (supposedly) gave the proceeds to the poor. It was only later that I realized that RH’s “fair go” came from failing to allow the local sheriff from observing the law and protecting those who maintained it.

In her article today Janet Albrechsten portrays Shorten as like a Robin Hood who is promising a plethora of “fair go’s” if he receives the necessary votes on May 18. But use of that term inevitably creates problems. Albrechtsen also makes the important point that his historical Labor approach to government is not in Labor’s tradition as represented by Hawke and Keating but more like Whitlam’s. My (considerable) experience of Whitlam is that, while he is still regarded as Labor’s icon, under his regime it was a complete shambles. That led to him only winning an internal challenge from Jim Cairns by one vote and forced him to make Cairns the Treasurer of Australia. But economic management went adrift.

If Shorten wins on May 18, it is likely that his government’s regime would operate similarly to Whitlam’s, although it would be difficult to be as bad. Shorten would likely be followed fairly quickly by left Anthony Albanese becoming the leader (in the internal election in 2013, which included party members as well as members of Parliament, Albanese got more votes than Shorten but not have enough under this system to obtain the Opposition leadership). The large number of policy changes under Shorten, would cause internal disruption even within the Labor party and would be likely to force him out. It would almost certainly make economic management much harder and could see a recession.

Albrechtsen draws attention to policies which are focused on distributional issues and which would cause concern within the party as well as outside it. This would be particularly so in regard to industrial relations, which PM Morrison has dodged in the debates between him and Shorten. By “industrial relations” I include the latter’s policies on relativities between sections of the workforce , such as child care. In my previous Commentary I suggested that Morrison needed to attack the large economic deficiencies in many of these items, including the overall effect on the economy. But while he handled the specifics well in tonight’s debate, he again failed to drive home the inadequacies for the economy.

One of these inadequacies is Shorten’s attempt to dodge the adverse economic effects of his climate policy. His refusal to acknowledge that his policy would have no such effect without taking account of the (unstated) costs of inaction left open a wide area of exposure of which Morrison did not make use. My letter published in today’s Australian obviously (see below) did not reach Morrison or his advisers.

Climate plan costs unjustified

Letter published By The Australian,12:00AM May 8, 2019

You report that, when asked on ABC’s Q&A program about the costs of his environmental policies, Opposition Leader Bill Shorten told host Tony Jones that “you can’t have a debate about climate change without talking about the costs of inaction”.

Well, let’s have a debate about the costs of inaction.

Perhaps the best expert asked to estimate the costs of inaction was Dr Ross Garnaut, who published two long reports for the government on the dangerous warming threat. His conclusion was that the most likely cost of inaction was that dangerous warming would occur in the next century.

One wonders whether Shorten agrees with Garnaut’s best estimate and, if not, when he predicts dangerous warming would start. It is dumb for the Opposition leader to rely on a Garnaut-like estimate but at the same time justify aggressive costs being incurred before 2030 with his economically damaging proposal to reduce emissions by 45 per cent.

Des Moore, South Yarra

Uncertainty in Labor’s Policies; Islamic Threat

Des Moore — Thu, 25 Apr 2019 09:48:13 +0000

What Are Labor’s Policies?

Today’s Australian has published considerable material on the failure of Labor to clearly enunciate its policies. I have previously drawn particular attention to Labor’s failure to publish aggregates alternative to those in the Coalition’s budget and to costings for the economy of its global warming policy. This defect remains.

But the recent emergence of many questions about Labor’s policies on specific policy issues has opened the way for much wider challenges to be made. The opening up of this area should also allow Morrison to reduce his announcements of funding small projects, which appear too much as vote buying, and focus more on attacking Shorten. It has also led The Australian to inter alia run the main letters column today with the heading Uncertainty Surrounds Labor’s Announced Policies. I was fortunate in having my epistle included as “lead letter” – as set out below.

Uncertainty Surrounds Labor’s Announced Policies

Letter Published in The Australian, April 25, 2019 (Bits in square brackets omitted by Ed).

Those closely following the election had been expecting that after Easter Labor would publish proposed budget aggregates and their costings – just as the Coalition did in its budget. No such luck. What we are getting are reports that material distributed by some Labor candidates omit to mention Shorten is their leader.

This may reflect the failure of Labor to decide [internally] on detailing the reasons for some of its decisions. Take the decision to require half of new vehicles to be electric by 2030.

It now appears that the recording of high electric sales in Norway [(much tinier than Australia)] may be due [importantly] to a near 100 per cent sales tax there on non-electric cars. Would Labor provide that “incentive” here?

Then there is the proposed Adani coal mine, for which the Coalition has given approval to all legal federal requirements.

But despite having said that he is being “governed by the law”, Shorten is not prepared to accept such approvals. Instead, he says this proposed investment by an Indian company is a matter for the Queensland government. Does this mean that Labor would cease to have the federal government determine foreign investment policy?

The foregoing are not the only Labor policy issues which are uncertain. Decision time has surely arrived.

Des Moore, South Yarra, Vic

I also include in this Commentary some very brief references to recent commentaries on some other specific issues, viz

After humming and hawing Shorten now says he would not review environmental decisions made by the Coalition. Yet at the same time Labor would not sign the “pledge” by the largest union, the CFMEU, tosupport the coalmining industry and, in implied support for the proposed Adani mine, for “coalmining developments that meet regulatory requirements”. Contrary to Shorten, some Labor candidates say they would leave the question of reviews open (see Shorten Says No Adani Review);
Shorten leaves open the possibility of tax reductions for those on high incomes (see this article);
Wong (Shadow Minister for Foreign Affairs) refuses to answer questions on the Australia-US alliance, Taiwan and refugees (see this article);
GetUp has removed its extraordinary ad denying (in effect) that Abbott is a surf life saver and, while agreeing with the removal, Abbott’s main challenger (Stegall) amazingly denies she has any connection with GetUp (see this article);
How can Shorten’s promise to alleviate the cost of living be met with the latest zero increase in the cost (see this article)?

The other two attachments reflect, firstly, the differences of view about the role of Muslims in the Sri Lankan bombings and the over 300 killings . As Andrew Bolt points out, it has exposed a general refusal of the political left to openly “admit” that one Islamic aim is to eliminate Christians, which is now certain in the case of the Sri Lankan killings. Of particular interest is the possibility that the SK killings are a revenge for the killings of Muslims in Christchurch New Zealand. Bolt’s analysis is revealing in identifying prominent politicians, including Obama and Hilary Clinton, who have refused to even acknowledge that the death of Christians has been the aim (see Bolt on Denials of Muslims in Sri Lankan).

The second attachment outlines the extent of persecution of Christians and the widespread failure of believers in Christianity to do much about it. The author is Bill Muelenberg who is an expert in Jihadism and who worked in the Institute of Public Affairs when I was also there. He points out that “there have been 34,891 deadly Islamic terror attacks since 9/11. That occurred 6,431 days ago. So we are now averaging five and a half such attacks each day since then. It is getting worse”(see attached Sri Lanka, Jihadist Massacres, and Western Denial).

In an earlier Commentary I have also written about Mark Durie who has written a new book, THE QUR’AN AND ITS BIBLICAL REFLEXES, which convincingly argues that the Koran requires Muslims to kill non-Muslims.

Election Campaign Still Not Informing Voters

Des Moore — Tue, 16 Apr 2019 22:18:41 +0000

I start by mentioning that my daughter, Lisa, is re-visiting us in Australia after performing in America (where she presently lives) to give piano recitals here. She has recently played on several occasions in New York and has had excellent reviews in the NY Times. Her first recital here on this occasion is at the Melbourne Recital Centre next Wednesday at 6pm (the program is here and tickets are available – phone 9699 3333).

Election Campaign A Scatter: But Started Favouring Morrison

Yesterday’s electioneering has started across scattered issues, with both sides seemingly stuck on announcing every day small amounts of new money for initiatives regarding which the great majority know little about (other of course than to “buy votes”). The Coalition needs to focus more on the economic picture which, Morrison says, is what the Coalition is all about. Rather surprisingly, Shorten has attracted media criticism while Morrison has come off largely scot free. Of particular interest was that the leftish Australian Financial Review drew considerable attention to Shorten’s problems. It is encouraging that this section of the media has (almost) given a bipartisan view/comment.

The heading of the AFR article “Shorten’s $34b Super Gaffe” clearly does not help Shorten. It relates partly to Shorten’s response at a press conference that “We have no plans to increase taxes on superannuation … (or) to introduce any new taxes on superannuation.” In fact, it appears that there is a Labor policy which would raise $37bn over a decade from the super industry. As the article says, “Labor has announced four superannuation policies ahead of the election campaign, which the Coalition estimates would see a $34 billion increase in tax over a decade, hitting hundreds of thousands of workers” ( for details see article). Excuses have been made by Labor spokesmen and Shorten now seems to be saying that he meant no additional taxes are intended.

In what the article describes as an “awkward press conference”, Shorten also “repeatedly declined to answer questions about the impact the opposition’s carbon emissions reduction policies would have on the economy”. The Australian also reports on this press conference (see Shorten in Testy Clash with Reporter) and, if more journalists were prepared to follow suit, voters might get a reasonably accurate picture of what both sides are proposing. In an interview tonight Shorten did say that he does not agree with the model produced by Dr Fisher (that was reported in an earlier Commentary now on my web). But Shorten did not offer any estimate other than to say that the economy will grow by a particular amount, which interviewer Dr Stone claimed would mean a slower rate.

But changes need to go further than this. As I have argued in earlier Commentary, an attempt should be made by the media and other organizations to highlight the failure of Labor to produce an alternative Budget to the 2019/20 to 2022-23 one recently presented to Parliament by the Coalition. This is “standard practice” and should concentrate on what might happen in the next four years, not the next ten for which any figuring is pretty meaningless (in fact, budgets normally describe any figures after the next two years as “projections”, not estimates).

Today’s Australian published my letter (see below) expressing concern that Labor has not done the same as the Coalition and arguing that at least Bowen should ask the Parliamentary Budget Office (with whom Bowen appears to have been in close contact and which body has (properly) advised Bowen) to produce a Labor budget.

The absence of any such alternative budget by Labor has led to a suggestion made on Sky News tonight by Dr Judith Sloan and Dr Andrew Stone that Labor has gone into the election without being adequately prepared and is now in a catch up phase. As the AFR article says, “Labor was forced on the backfoot over revelations it had deleted dozens of paragraphs of details over its negative gearing and capital gains tax policies from its website”. Shorten should certainly be pressured by the media and of course by the Coalition to produce a full explanation of its policies as well as an alternative budget.

Bowen needs to back up his economics policies with proper costings

Letter Published by The Australian, April 17, 2019 (Bit in square brackets deleted by Ed).

Your survey of the initial election promises by the two main parties (“Voter disillusionment fed by dishonesty in politics”, 16/4) raises concerns about their effect on total budget spending and revenue [and whether some promises can actually be implemented]. The Coalition has already provided an estimated budget for the next four years, including tiny surpluses, and this should be updated during the campaign if even further additional spending is announced.

There is particular concern that Labor is not providing any alternative budget except to claim its surpluses will be larger than the Coalition’s. But how can we voters assess that claim without also having estimates for spending and revenue.

True, estimates by Treasury made before the campaign started show that the level of taxation under Labor would reach 26 per cent of GDP whereas the Coalition has confirmed it would not rise beyond 23.9 per cent.

Surprisingly, Labor Treasurer Chris Bowen has questioned Treasury estimates but without providing any himself. This despite the public’s legitimate interest and his access to the Parliamentary Budget Office, which he should now ask to publish its assessment of Labor’s costings as soon as possible.

Des Moore, former deputy secretary, Treasury, South Yarra.

Coalition Election Campaign Starts Poorly

Des Moore — Sun, 14 Apr 2019 11:33:11 +0000

Is Coalition Able to Persuade Electorate of Dangers in Labor’s Program?

The campaign for the election on 18 May started officially on11 April although statements of policy had been made prior to that, as had media assessments. Two prominent conservative commentators had in fact already indicated their view that Labor will win.

Terry McCrann wrote on 11 Apr “One thing is absolutely crystal clear about the election. If Labor wins — as to me, seems certain — it will hit the ground running, straight after the election, in June”. He added that “it has a program to dramatically increase taxes on negative gearing, franking credits, capital gains and trusts; it will not cut the company tax on big companies from 30 per cent, which is now very uncompetitive, with the US down to 21 per cent, and will revisit the cut on medium-sized companies; it will also further squeeze especially small and medium-sized businesses with the so-called “living wage”; and then there’s the whole issue of power prices, which will just continue to increase and increase at an accelerating rate under Labor’s so-called climate change policy” (see McCrann Says Coalition Won’t Win).

Andrew Bolt doesn’t rule out the remote possibility of a Coalition win but argues that Morrison must upgrade himself and the Coalition. He asks “Where on earth is your mongrel? Your fight? Your big wake-up-Australia cry? You’re starting behind, remember. Three seats short of a majority already, and with every poll saying you’re headed for a hiding”. Bolt adds that the Coalition also faces a starting point that the “polls show they’ve been itching to do for two and half years – to vote out this brawling, divided Coalition Government that’s given us three different Prime Ministers but next to no wage growth”. Yet, he asks, “what does Morrison do in his first and most important speech of the election campaign? What a snooze-fest” (see Bolt Says Morrison Must Attack Labor Policies).

The Weekend Australian’s editorial does not predict the likely winner of the election campaign but points out that, while “the Prime Minister is offering to boost incomes through a larger economy, running on his party’s traditional values, such as hard work, enterprise and aspiration”, the Opposition Leader promises to “radically change an economic system … Labor’s method is more spending on services, funded by new taxes on high earners, property owners, retirees and investors. To raise award wages for some workers, Mr Shorten will hand more power to unions and revamp the terms by which the industrial umpire determines the minimum wage. This is old-school Labor, buried in 1983 after Bob Hawke won office: redistribution to promote equality. ‘When everyday Australians are getting a fair go, then this economy hums’, Mr Shorten said on Thursday in a backyard appeal to voters”itorial (see OZ Editorial).

In short, there is a wide view that a win for Labor would likely mean a major change in how the economic system operates, with a bigger role for government services, a major deterrent to private investment and a slower rate of economic growth. Australia would move away from America and towards the European Union (sic) from which some members are trying to escape. This possibility should provide a basis for a Coalition attack.

What is the Likely Effect of Labor’s Proposed Expansion In Government

The extent to which government might expand under Labor is indicated by its proposed increase in the level of taxation to almost 26 per cent of GDP over the next ten years. At this level Labor would be the highest taxing government ever: the previous highest was 24.3% of GDP in 2005-06 (see AFR Quotes Treasury Estimates Of Australia Being Highest Taxer Under Labor).

By contrast, the Coalition’s 2019/20 budget estimate for taxation is 23.3% of GDP and that is not estimated to increase over the following three years. It also has a self-imposed undertaking to not increase taxation to more than 23.9% of GDP. Note that if tax levels were at Labor’s 26% of GDP next year that would mean total taxation of about $520bn, or about $60bn or 13% more than estimated by the Coalition ie this would be about an increase in the size of government at the Federal level.

There are precedents for large increases in the size of the Federal government in Australia.

First, when the Labor government was in office under Hawke from March 1982, taxation levels increased in the four years from 1982-83 to 1986-87 by no less than about 60% in real terms. In 1986-87 taxation revenue reached the same level as is estimated next year – 23.3% of GDP – up from 21.7% in 1982-83. At the same time, moreover, the budget deficit increased and ran at a much higher level, which led then Treasurer Keating to warn that Australia was in danger of being regarded as a banana republic. Then, thanks mainly to then Labor Finance Minister Walsh, action was taken to reduce spending for three years in a row (from 27.0 % to 22.9 % of GDP) and a budget surplus also followed for three years. An almost complete reversal of budget policy.

Second, in response to the global financial crisis originating in the US, the first Rudd government (2007-10) moved the budget from a surplus of 1.7% of GDP to a deficit of 2.1% in 2008-09 and deficits and relatively high levels of spending continued into the next few years. Whether this had any substantive effect in “saving” the economy remains in dispute. But Australia’s relatively strong banking system and high levels of trade with China certainly helped maintain growth and prevent any recession. Then, despite expenditure reductions by the Abbott government in 2014-15, deficits continued at relatively high levels under the Turnbull government (2015-18) until 2017-18 when that government brought the deficit down to 0.5% of GDP. However, expenditures remained at the relatively high level of 24.5% of GDP in that year and have continued at around that level even after the Morrison government took office in August 2018 and produced the 2019-20 budget.

In short, Hawk’s attempt in the 1980s to effect a large increase in the size of government did not succeed and nor can Rudd claim success in his attempt to adopt a Keynesian increase in spending and deficits in response to the global financial crisis which centred in the US. The Australian economy was primarily “saved” by our relatively strong banking system and our trade with China. However, under Labor and Turnbull, taxation levels have crept up again to over 23% of GDP since 2018-19 and we now face the prospect that Labor would increase that further to 26% of GDP at some time over the next ten years.

Conclusion

Labor’s proposal to increase the level of taxation to 26% of GDP, and to concentrate increases on those on high incomes, is likely to have adverse effects on investment and economic growth (see Uren’s Analysis Shows Labor’s Taxes Increase More Than Spending Plans). Such adverse effects would also come if Labor proceeds with reductions in emissions and increases in renewables at both the Federal and State levels. History also suggests that Labor finds it difficult to, as Morrison has said, “manage money”. Also, while it claims to be aiming for bigger budget surpluses than the Coalition, it is unclear as to how much it will aim to exceed the Coalition’s present estimate of about 0.5% of GDP.

As to the budget overall, we can speculate that with Labor having, say, a 1% GDP budget surplus and 26% of GDP from tax, that leaves 25% of GDP for spending. This is only about 0.5% of GDP higher than the Coalition’s estimates for each of the four years to 2022-23. It suggests that Labor’s additional spending for each of those years might not be much greater than present Coalition estimates. Still the opportunity is there for the Coalition to attack Labor’s proposed increases in levels of taxation and spending, reminding the electorate of Labor’s failures with higher levels of spending in the past and the adverse economic effects of higher levels of taxation. This requires Morrison to stop announcing “handouts” and concentrate on informing the electorate of the problems with Labor’s proposals.

Polling Shifts for Parties

Des Moore — Sun, 07 Apr 2019 22:46:17 +0000

Polling Improves Coalition’s Position But Still Leaves Them Struggling

Two new polls tell different stories, one favouring the Coalition but the other not.

First, Newspoll shows the Coalition’s TPP as up by two percentage points with Labor’s down the same two points compared with the March 7-10 poll. Hence the Coalition is up from 46 to 48 while Labor’s is down from 54 to 52 now. Also, while the primary votes ( before taking account of preferences from other parties) for the Coalition have improved (from 36 to 38), Labor’s have fallen (from 39 to 37). These send out a hopeful signal to the Coalition.

Newspoll also shows an improvement of two percentage points in Morrison’s net satisfaction rate (from 43/45 to 45/43) and, although Shorten’s also increased that was only by one point (36/51 to 37/51). As to who is regarded as better PM, Morrison improved from 43 to 46 while Shorten fell from 36 to 35.

The National Political Editor of The Australian describes this as a “bounce” for the Coalition (see Benson Says Newspoll Gives Coalition a Bounce) although it is still well below even the 50.4% vote it reached in the double dissolution election in 2016 when Turnbull was leader. That election gave the Coalition only a one seat majority in the Lower House of 150 and it had a swing against it of 3.5%. In the Senate the Coalition had 30 seats, Labor 26 and others had a record 20. In other words, the Coalition needs to do much more than catch up to Labor if it is to be able to at least control a Lower House which will have several independents as well.

Second, an Ipsos poll run by the Sydney Morning Herald ( the timing is presumably designed to display competition) shows that on a TPP basis the Coalition has fallen since its last poll in February 12-15 from 49 to 47. By contrast, over the same period Labor has increased from 51 to 53. Ipsos also shows a reduced net satisfaction rate for Morrison (from 49/40 to 48/39).

The Newspoll is generally regarded as a more accurate and reliable poll and Ipsos operates less frequently than Newspoll. It’s result is also questionable on this occasion given that its poll reported 41% believed the budget was a “fair” one and only 29% thought it wasn’t. More generally, the Budget appears to have been well received and it would be unlikely to have caused a fall for the Coalition. In fact, Labor would seem to have been more likely to have had a fall given the announcement of a policy requiring half of motor vehicles to become electrified by 2030 (there are now less than 1%) and the failure to provide details of how the proposal will proceed and what it will cost. These and other developments suggest that the Ipsos poll is not an accurate reflection of the views of the electorate.

As pointed out in my previous Commentary (see in particular Coalition’s Budget & Labor’s Reply on 6 April), while Labor has announced many policies there has been little back up so far on the costs whereas the Coalition has published a comprehensive budget and Labor has had access to the Parliamentary Budget Office which should have allowed it to publish estimates of the costs of major items of spending and major tax changes. Given the general dissatisfaction with the plethora of announcements on new policies, it would not be surprising if an increasing proportion of the electorate now wants more back-up.

I refer again to Terry McCrann’s piece of April 6 arguing that “Labour has a two-stage strategy to destroy Australia”. He lists policies announced by Labor which call on the Coalition to publicly attack and demand costs if it is to have a chance of winning the election.

Des Moore

Coalition’s Budget & Labor’s Reply

Des Moore — Fri, 05 Apr 2019 20:39:00 +0000

Shorten’s Budget Reply Speech Leaves Many Questions Unanswered

Economic Effects From Budget Aggregates

Shorten’s reply to Morrison’s Budget for 2019-20 does not offer any aggregate estimates for spending and revenue next year or for the four years aggregate to 2022-23. These are normally provided as a budget presentation and Morrison’s/Frydenberg’s figures are in the published Budget papers (see this summary in Federal Govt Budget Aggregates 2018-19 to 2022-23) .

Of course, Shorten does not have the access to the bureaucracy needed to construct estimates but he does have access to the Parliamentary Budget Office which will have provided confidential advice to him on possible variations to the official estimates. Yet even Shorten’s promise to have larger estimated surpluses than Morrison does not provide any indication of what the figures are. For one thing, while Morrison’s estimated surpluses for the four years are around a very poor $45bn (about 2% of GDP for those years), Shorten’s claim could be easily presented simply by indicating a miniscule higher estimate (say) $50bn. More questionably, Labor might have estimates for both total revenue and spending which are (say) 5 percentage points higher than Morrison’s but are undisclosed and yet still have the same estimate for surpluses. That would mean a significant increase in the size of government (tax and spending) with potential adverse effects on the economy and the private sector.

In short, so far Shorten has mentioned less about aggregate figures and focussed more on claiming what Labor will spend on a wide range of estimates of specific items. He does for example claim to be spending more on health and education, which will be among those which feature in the election debate. Perhaps the election debate will force him to expose the composition of the more important items of expenditure where he claims to be a bigger spender.

Shorten has of course attracted particular attention to his proposal to provide $2.3bn for a Medicare cancer plan through better diagnostic services and free cancer consultations, and this has attracted wide support because many people face expenses in attempting to overcome the disease. However, while this initiative seems to deserve applause, it does not provide a perspective on other items covered by the estimates for health or on spending already made on components of the plan.

It is pertinent that the Morrison government’s estimated total spending on Health over the next four years is about $500bn, including about $90bn to the states under the National Health Reform program and about the same amount for specific purpose payments on health to the states. Assessing the “new” cancer plan also needs to take account of the fact that public health is primarily a state matter and some of the items in the “new” cancer plan would already be provided by state run public hospitals. Thus this plan is not all new but is to a considerable extent increasing the eligibility for accessing the treatment of cancer already in place.

Economic Effects of Changes in Tax & Spending Policies

The Medicare Cancer plan illustrates on a relatively small scale how changes in government policy can improve the financial and health positions of individuals. What seem to have been neglected are the changes in tax policies which are likely to have net adverse effects on the decision making of the private sector and the economy as a whole.

This analysis derives from today’s article in Weekend Australian by Terry McCrann (see McCrann on Labor’s Budget & CC Policies). He argues that “Labor has a two-stage strategy to destroy Australia”, even suggesting that Labor could take us down the Venezuelan track.

McCrann’s Stage One,

“to be delivered immediately, is designed to destroy the entrepreneurial, investing, business risk-taking, job-creating class — with a $200 billion-plus tax attack on them and them very specifically and deliberately, the biggest in Australian history. It is sobering to detail what a Labor-Green government — as it will be, with the Greens in de facto coalition and Richard Di Natale de facto deputy PM — proposes to do from the get-go.

End franking credit refunds.

All but abolish negative gearing.

Double capital gains tax.

Increase taxation of trusts.

Increase the top personal tax rate to 49 per cent.

Not cut the major corporate rate from an increasingly globally uncompetitive 30 per cent”.

A detailed analysis would need to be made of the adverse economic effects of these policies and of the likely adverse effects not mentioned by McCrann of the establishment of a policy of a living wage and the increased regulation of wages and conditions of employment (virtually nothing was done to make use of the Dyson Heydon report made when Abbott was PM). But when put together these policies certainly have the potential to seriously detract from Australia’s economic performance. The detraction could be similar to what occurred under Whitlam.

But account also needs to be taken of the adverse effects of McCrann’s Stage Two, the implementation of the climate change policy. Such a policy did not exist under Whitlam but was started under the Howard government and is now having serious adverse economic effects, notably in higher electricity prices which have increased by a large percentage under the Turnbull/Morrison governments and which would increase further under a Labor government (or require much higher subsidies than already exist). Labor’s policy was outlined in more detail last Monday before the Budget and it includes for the first time a policy requiring that 50% of motor car vehicles to be fuelled by electricity by 2030 (!) and a regulatory policy restricting the cutting down of trees.

Viewers of my Commentary will be aware of the many reasons why the rationale of the dangerous global warming theory does not stand up to close examination. I have also suggested that there is scope to moderate the existing policy. Such a moderation at the start of the electoral debate may provide the only way the Coalition can save itself in the election.

I conclude with one the last remarks made by McCrann in his article, viz

“What the old-is-new-again Labor party of Bill Shorten — a man with a figurative cloth cap and a brain to match but a wardrobe full of, if not Zegna, still Super 120s suits and a taste to go with them — proposes is to destroy the two core foundations of not just a modern economy but modernity itself and indeed civilization”.

Commonwealth Budget 2019/20

Des Moore — Wed, 03 Apr 2019 08:53:18 +0000

Commonwealth Budget For 2019/20 Won’t Save The Bacon

Today’s Media has included many comments on the Morrison Government’s Budget for 2019-20 as well as estimates of revenue and expenditure for the following three years. These include a large number of decisions and it would not be appropriate here to examine them in any detail: indeed I challenge anyone to examine what one journalist described as “a budget speech littered with references to plumbers, couriers, cranes, hard hats, teachers, tradies and nurses”. My general conclusion on the speech I watched on TV was that it did not impress most on the Coalition benches and some of those there tended to drop off and, after a time, showed little encouragement as Frydenberg continued well after the half-hour finishing time allocated to budget speeches. In consequence, what my comments below mainly relate to are the totals of revenue, expenditure and what is commonly treated as the deficit or surplus for the four years.

But these need also to take account of the possible reactions to budget decisions on taxation and spending on capital projects which increasingly purport to extend beyond the four years. For instance, the Morrison government’s budget announcement included an addition of $25bn to the existing infrastructure program of $75bn which is spread over in ten years. This reflects the increasing involvement of the Commonwealth in what are (or should be) basically State matters including the congestion resulting from higher immigration but which the Federal government also believes it needs to be involved in order to attract votes. The result of the election in NSW, in which both the Liberal and National parties lost seats, led the Morrison government to publicise in the Federal budget its involvement in regional NSW. On tax, the difficulty in assessing the tax policy is that the second round of personal tax reductions will not start until 2022-23 and that is then reflected in a reduction in about half the estimated surplus for that year.

In interpreting the budget it is also important to realise the Coalition will face the election in May with electoral polling which indicates it is almost certain to lose. As such, apart from possibly indicating the Coalition’s budget as no more than a manifesto with which to start the election debate, the same applies to the manifesto which Shorten has announced. He is now further developing that by announcing yesterday the 50% compulsory electric cars by 2050, which has (rightly) been widely characterised as absurd. Shorten has also failed to indicate the costs of his environmental policies. This situation further widens the gap between the two parties on the issue of dangerous global warming which appears likely to be a major discussion item. Unfortunately, the Treasurer’s budget address re-stated the Coalition’s existing policy of reducing emissions as stated in Paris and announced a $3.5bn “climate solution package” apparently designed to soften the moderates within the Coalition. Another bad poll would provide the opportunity to moderate this policy but it looks as though such a moderation is not politically possible.

Yet it is reported today that three senior ministers, including Morrison, have decided over-night to add over $300mn to energy supplements and amend the budget the day after it was introduced!

In a situation of emergency one possible policy change on the environment might extend to pointing out that the prediction in temperatures by supposed climate experts has been three times higher than the actual increase in temperature as published by the IPCC. This failure of “scientists” to get anywhere near a meaningful prediction in temperatures indicates the need to urgently review the dangerous warming belief and provides a basis for at least moderating current policies (see advertorial Global Warming as published in today’s Australian by the Climate Study Group). This research indicates that the most highly likely warming over the period to 2100 does not justify the current expenditure by governments of squillions of dollars on reducing the usage of coal.

Following are my brief comments on the major items in the Budget:

Overall, there is no indication that the Morrison government aims to reduce the size of government. Estimated payments (ie expenditure) by the Federal government are about the same proportion of GDP throughout the four years covered by the budget (24.5 -24.6%). That is fractionally lower than in 2018-19 (24.9%) but that probably reflects a spending splurge in that year to reduce the amount to be allocated in the budget year. That is estimated at 25.2% of GDP, which is fractionally higher than in the last year of the Keating government in 1995-96 and is higher than in the last few years of the Howard government;
Treasurer Frydenberg (and Morrison) have claimed that the budget showed they had not increased taxation. But tax as a proportion of GDP is shown as slightly higher in 2019-20 than in the previous year (23.1%) and only fractionally lower in the last of the four budget years (2022-23) for what that may be worth. As there is no data readily available on the split between company and personal income tax, the increase in company profits may mean that personal tax proportion of GDP may have been reduced. But total estimated taxation in the current and next three years is the highest proportion of GDP since the final years of the Howard government in early 2000s;
As has been much acclaimed by the Treasurer and Morrison, after 11 years in budget deficits and a consequent increase in net debt, a surplus is estimated for 2019/20 (0.2% of GDP). But this is not a result that a government would normally boast about, which is probably why Frydenberg has limited his reference to the four year total. It is also exposed to possible minor adverse effects from reduced company profits due to falls in commodity prices. It’s good to be “back in the black” but the aim should be to achieve a much higher surplus and pay off more debt.

Overall this is a useful budget (a “B” perhaps) but it falls short of what is needed to avoid scattering spending to buy votes, to reduce debt and does not provide a bulwark against attack from serious adverse changes in economic conditions here or overseas. It does provide a test for whether Labor is prepared to maintain the aim or fall back to the deficits incurred by Rudd. Hopefully, the latter are so recent that Shorten will be able to persuade his left wing to stick to the surplus aim.

Should Coalition Change Any Policies?

Des Moore — Sun, 10 Mar 2019 21:00:56 +0000

The latest Newspoll shows that, after three successive results on 47/53 TPPs, the Coalition has now fallen to 46/54. Even though Morrison’s personal approval ratings improved a single point to 43 per cent so too did Shorten’s and, while Morrison’s disapproval numbers fell from 48 per cent to 45 per cent, Shorten’s also fell two points. These ratings gaps have not altered to any significant extent over the last fortnight and, although they still favour Morrison, there is no real sign that the Coalition can close the overall gap on TPPs by the May election (see Coalition’s Newspoll Down To 46/54).

What Now?

“The Australian’s National Affairs editor argues that “Scott Morrison is approaching the point of no return. He either sticks with the current political strategy in the hope it will eventually start to bite, or he changes course before it’s too late. Both options are loaded with risk. The polls suggest that whatever the Coalition is doing, it is not working. But to restart the government agenda now would be ridiculous. There is no other narrative for Morrison. The economy and national security are what Coalition governments do. Cooler heads within government will be advising colleagues that the real driver of the polling numbers are the constant, and one would have to assume tactical, interventions. (see Morrison Near Point of No Return)

My belief is that the Coalition should in fact “change courses” asap. Even if it is too late now to win an election, it should aim to provide a better base from which to counter Labor in office. Such changes should include

A statement that policies operated during Turnbull’s reign will hitherto be revised to better reflect the Liberal Party’s small government and competition market beliefs. That should be accompanied by indicating that moves will be made to expel Turnbull from leadership of the Liberal party (see Turnbull).
Morrison should offer to subject himself to another election contest and indicate that he would support the appointment of Abbott if he won such a contest.
An indication that policy changes include changes in climate change policy involving a withdrawal from the Paris agreement, a major reduction in the emissions reductions target, a major lowering of the renewable target, the elimination of related subsidies, no increase in refugees from the already high level, a substantive reduction in immigration from the present rate, a closing of any gaps that allow asylum seekers to obtain unwarranted residence, and a reduction in government expenditure over the next three years to the level reached in the last year of the Howard government (to 23.% of GDP from the present rate of about 24.5%) to be set out in the April budget, with a reduction in the income levels at which social welfare is provided.

More Ministers Quit; Treasury Officer’s Life

Des Moore — Sun, 03 Mar 2019 22:31:36 +0000

Can Morrison Cope with Two More Cabinet Departures

Last Friday’s Commentary suggested that the latest Coalition’s Newspoll of 47/53 for the third successive time indicated that the Morrison government was still in serious trouble. I suggested that the additional policy decisions announced by Morrison on climate policy would be unlikely to help close the gap.

These measures included acceptance of the Paris agreement and an expanded use of renewable through the establishment of the very uneconomic Snowy2.0 and the usage of “big batteries”. Energy Minister Taylor also claimed the new measures would cut energy bills while lowering emissions but this failed to take account of the additional costs from using the Snowy or from back-ups needed when other renewable are not available. I noted that it seemed unlikely that the Energy Minister would be able to reduce electricity prices except through the adoption of a regulatory system which legally limited the maximum price able to be charged by retailers.

While the Cabinet elevation of Senator Reynolds to Defence Minister (from Assistant Minister for Home Affairs) means the Morrison cabinet now has the greatest representation of women in the senior ministry of any government, Pyne will stay as head of that ministry until after the election, when he will not stand for return to Parliament. Mr Morrison said of Senator Reynolds: “When you can call up a brigadier, in the form of Linda Reynolds, to take on the role of defence minister, it shows we have a lot of talent on our bench to draw from. Linda will be the second female to serve in a cabinet-ranked defence portfolio. She will bring the number of female members in the cabinet to seven. “This is the highest number of any cabinet since federation.” More importantly, in the interviews she has conducted since her appointment, Reynolds has shown she should have become a cabinet minister some time ago.

The recent loss of several Coalition Ministers, including (until the election) of Pyne as a senior Minister and the immediate resignation of Defence Industry Minister Ciobo, has led some to question whether this might not allow Morrison greater freedom to run the “ship” and to have the Coalition become a genuine “conservative” party with a reduced influence from so-called moderates. Of particular importance in this regard is the end of Pyne, who is reported as once saying he could have stood for Labor, and ran as a Liberal only because he lived in a Liberal seat (see Norington’s Analysis of Pyne or Realities of Politics). With both Turnbull and Pyne departing, the potential for a move of the Coalition to conservatism in greatly enhanced.

In today’s Herald Sun, commentators Andrew Bolt and Rita Panahi both argue that this situation may help the electoral position of the Coalition. Bolt argues that

“Malcolm Turnbull gone, Julie Bishop and Kelly O’Dwyer going, and now Christopher Pyne, too. Know what some Liberals call that? A good start. The election will do the rest. Check Sportsbet’s seat-by-seat odds. They tip that from the ruins of this Morrison Government after the May election will crawl a Liberal party where conservatives will again have the numbers and most of the talent. The Liberal Left has destroyed not just the party but itself, and that’s why some of its leaders are now deserting — and slamming the door in fury” (see attached Coalition May Become Conservative).

Of course, there is a lot of water to pass under the bridge before the election and Bolt acknowledges that Morrison himself is “ideologically flighty”. But Morrison has a much improved outlook if he can present himself as a leader who believes in the Menzian “small” government approach and who will spend more time attacking the policies being canvassed by Shorten.

Responses to Assessment of Treasury Life

During the time I was in Treasury (for 27 years until 1987) I naturally had several acquaintances with David Morgan who joined in 1980 at age 33 and left in 1990 to join Westpac. He did not work for me during that time but I became familiar with his economic and political views, although unlike some others I was not invited to his marriage to a Labor minister. His decision to have a book written about his life, titled David Morgan: An Extraordinary Life by an Oliver Brown and published at age 72, reflected his somewhat aggressive approach to letting the world know of his views. On 2-3 March the AFR published an article by Brown who says that at Westpac “he was given a brutal assessment of his management skills”.

The Australian’s Business journalist Richard Gluyas has also written about Morgan’s experiences and his article of 2-3 March is attached (see Gluyas on Morgan). That article however does not appear to provide a completely accurate picture of the then Secretary to the Treasury, John Stone. This has resulted in letters published by each of Stone and myself below.

Ros Kelly warning ‘did not happen’

Letters Published in The Australian, John Stone, Des Moore, 12:00AM March 4, 2019

8 Comments

I refer to Richard Gluyas’s Business Review article (“How a banker’s life lessons were forged”, 2-3/3) regarding David Morgan’s biography. In the article Morgan is quoted from the book as saying: “Over drinks one Friday night in Canberra, before (Morgan) married (Ros) Kelly in 1983, the arch-conservative then-Treasury secretary John Stone scowled at Morgan: ‘If you marry that woman, you will never be secretary to the Treasury’.” That is untrue.

I would never have said such a thing about Ros Kelly, nor would I have thought of Morgan (then a relatively junior officer) as a possible future secretary to the Treasury. My subsequent invitation (which I accepted) to attend their wedding renders the allegation even more bizarre.

I have known Morgan for 47 years. His intellectual abilities have never been in doubt. It was for an entirely different reason, when he asked some time ago that the author of his then planned biography might speak to me, that I declined.

John Stone, Lane Cove, NSW

In his commentary on David Morgan’s book on his own life, Richard Gluyas writes that “after an early career at the International Monetary Fund”, Morgan switched over to Treasury where he formed a tight bond with fellow thinkers who allegedly “marginalised” Treasury secretary John Stone, who “then exited Treasury”.

I have not read this book but am puzzled by this assertion.

As a deputy secretary Treasury at the time Stone resigned in 1984, I was in close contact with him at that time and I do not recall him attributing his resignation to any pressure from within Treasury. To the contrary.

Regarding the exchange rate float in 1983, Paul Keating’s concerns later of the danger of us becoming a banana republic suggest Stone correctly advised implementing other regulatory and policy changes with the float.

Des Moore, South Yarra, Vic

Coalition Remains in Serious Trouble

Des Moore — Fri, 01 Mar 2019 01:34:30 +0000

Newspoll & Subsequent Policy Announcements Suggest Coalition Still in Serious Trouble

Due to a major technical problem which put my computer out of action for two days (possibly caused by a hacker I was advised) I am now in a catch-up position in regard to circumstances where numerous pre-election statements have been floated around by both major sides of politics. It has almost seemed like a new policy per day, which seems unlikely to have attracted votes because of the limited attention by the Coalition to explaining benefits. One commentator even described Morrison as a Muppet and, despite his increased media appearance, it is difficult to see a closing of the polling gap next time.

The February Newspoll left the Coalition on a 47/53 TPP for the third successive time and showed a fall in Morrison’s net satisfaction rate from minus 2 to minus 4 (Shorten’s also fell to a similar extent). This polling occurred despite expectations that Labor would be adversely affected politically over the passage of the Medivac bill instigated by Labor/Phelps/Greens and passed because the government had lost its control of the lower House. This legislation allows refugees and asylum-seekers to be fast-tracked to Australia for medical treatment on the orders of two doctors and involves an effective loss of border control decisions by a Minister, although the concern seems more about what would be likely to happen under a left wing Labor government than about the exploitation of the Medivac.

In fact, instead of a Labor win, Morrison appears initially to have instigated a favourable course of action by announcing that existing asylum seekers on Manus/Nauru will be transferred to Christmas Island and this initially secured approval from Shorten. However, Shorten has since backed away from his “approval” and it is not clear if the possible “misuse” of the legislation can be made there too.

That aside, Morrison has responded to pressure from within the Coalition, and of course from Labor’s accusations (and from some media “experts”) that it is taking no action on climate change or to fulfill its undertaking to reduce electricity prices. Morrison has apparently decided to make various day by day announcements designed to convey the impression that action is being taken. But the measures announced would be unlikely to involve any significant reduction in prices (unless accompanied by increased subsidies) and are suddenly focused on increasing the Coalitions’ reliance on renewable as a major part of its CC policy, viz

“the Prime Minister said the government’s support for big hydro projects was vital and economically prudent, as Australia’s energy market “continues to transition towards renewables”. “If you want to have a renewables future, you’ve got to have big batteries like this, and the commercial element of that is quite compelling and that’s what the numbers so far have shown,” he said. “We get the economic harvest, we get the jobs harvest, we get the energy harvest, and we get the renewable and the sustainable energy harvest that delivers on our environmental commitments.” The opposition said the government’s commitment to hydro power “only make sense under Labor’s renewable energy policies” (see Morrison Announces More on Renewables).

However, in the same article Energy Minister Angus Taylor claimed the new energy efficiency measures would cut energy bills while lowering carbon emissions. “We know that businesses and community groups are struggling under the weight of high power prices,” he said. “That’s why we’re taking strong steps to ensure they get the practical support that they need to reduce their energy use without reducing productivity.”

True, the reduction in emissions from the (newly announced) shift to renewable would in themselves favour lower prices. But renewable additions would also add to costs (including of course the additional back-ups needed in case renewable are not available) and would be unlikely to lead to lower prices overall (see also Coalition Climate Policy).

It was particularly disheartening to see on Sky News that there was agreement amongst participant that Turnbull’s decision to expand Snowy Hydro was endorsed by Morrison as a major component of his latest climate change policy. No account seemed to be taken of the much higher cost of such expansion compared with the cost of producing the electricity using fossil fuels. As Judith Sloan points out, “were the electricity market not so distorted, there would not be any economic case for Snowy 2.0. The project has been around for many years and it never stacked up. The cost and the execution risk made it a complete non-starter. The fact the Coalition government refuses to unpick the distortions in the market, rather than adding to them by promoting Snowy 2.0, is a sad indictment of where energy policy has landed. And, by the way, for the sort of investment being devoted to Snowy 2.0, you could get several high efficiency, low emissions coal-fired plants” (see Sloan Says Snowy2.0 Fairy Story).

Many others have concluded that the Snowy2.0 should not be started but it seems likely that bureaucrats in PM&C and Environment have promoted the case.

In considering possible electricity price reductions, it is pertinent to note that under policies adopted by the various states in recent years (which have been based on the perceived need to reduce the usage of coal because of the supposed danger from higher temperatures):

The adoption of such policies has been a major contributor since 2010-11 to a trebling in average wholesale electricity prices, rising from about $30-40 per MM to about $80-110 per MM;
While businesses and households would be unlikely to have experienced similar such increases at the retail level (data for retail prices back to 2010-11 are not readily available), they would undoubtedly have increased since 2010-11 at a much faster rate than pre 2010-11;
The retail figures available for 2017-18 show an increase of more than 10% on the previous year according to figures published by theAustralian Energy Market Commission (AEMC), which was set up by the Council of Australian Governments through the Ministerial Council on Energy in 2005. In the current year the AEMC estimates a reduction of about 3% followed by another reduction of about 9% in 2019-20. The AEMC says the estimated falls since 2017-18 are “driven primarily by wholesale costs” but details of these estimated costs are not readily obtainable.
At this stage it is difficult to see any significant price reductions except by the Federal government establishing the Default price it has canvassed and by enforcing a maximum price at a lower level. Such a policy, said to be operated by regulation and claimed not to require legislation, would imply that there is inadequate competition in the current market and that seems to have been assumed in regard to the major generators. But no explanation has been given as to why the ACCC could not act to enforce competitive measures rather than the government itself establish a regulatory direct.